Oakeshott feels 'a bit duped' on mining tax design

Independent MP Rob Oakeshott says he feels "a bit duped" by the Government over the design of the mining tax, after it was revealed it raised just $126 million during its first six months.

Prime Minister Julia Gillard wrote to Mr Oakeshott late last month, saying she shared some of his concerns and that the Government was working with the states and territories to close a royalties loophole in the tax.

Under the minerals resource rent tax (MRRT), state royalty charges - including future increases - are refundable to mining companies.

"This issue was examined in the GST distribution review which found that increases in state royalties are neither desirable nor sustainable," Ms Gillard wrote.

She said senior bureaucrats were examining what changes could be made to how royalties are dealt with, and the Government would then consider what action to take.

Mr Oakeshott says he voted for the tax on the basis it would eventually replace state royalties, and feels "a bit duped" that it has not yet happened. However, he is pleased the Government has signalled a willingness to make changes.

"They recognise that royalties are an unsustainable and bad tax for Australia, and a better way forward is a national resource rent tax, and that Government would look for ways to penalise and reduce any opportunities for royalties to be increased and offset," he told ABC Radio National.

"We are stuck in transition, and for some reason these negotiations with the states are just start and stop, start and stop, start and stop."

Fellow crossbencher Tony Windsor is more circumspect about the design of the tax, saying he is getting advice about whether changes are needed.

Ms Gillard, along with Treasurer Wayne Swan, renegotiated the tax with the country's three biggest mining companies soon after replacing Kevin Rudd as prime minister.

Mr Rudd says the MRRT has not collected any significant revenue so far, but says it would be up to Ms Gillard and Mr Swan to decide whether any changes were needed to the design of the mining tax.

"I believe the Australian people deserve, through an appropriate tax mix, an appropriate return on the resources which are ultimately theirs," he told Sky News.

Asked whether the Government should be afraid of taking on the miners again, Mr Rudd replied: "No Government should ever take a backwards step in the pursuit of the national interest".

He says any redesign of the tax would need to take into account what undertaking the Prime Minister or Treasurer gave to the mining companies when they negotiated the MRRT.

When the Government handed down this year's budget it predicted the tax would raise $3 billion in 2012-13. That figure was later revised down to $2 billion.

Labor is coming under pressure from the Coalition to rule out further changes to the tax, given the lower than expected revenue collections.

"The Government should come clean now about what taxes it wants to change and what taxes it wants to increase," shadow treasurer Joe Hockey said.

"This game of ducks and drakes, snakes and ladders with the independents, letters of comfort to the independents before the election, and then afterwards they'll legislate changes.

"It's insidious political stuff, and I'd say to the Government: have a little bit of ticker, be honest with the Australian people about the new taxes you want to introduce and the changes to the mining tax."

Asked repeatedly this morning whether further changes were possible, Assistant Treasurer David Bradbury responded: "We have no plans to make any changes to the MRRT".

"We will continue to monitor the revenue receipts. This is a very volatile tax - resource rent taxes always are.

"In terms of royalties, that's a matter that is being considered by the GST distribution committee. That's a process that we intend to allow to run its course."

Labor frontbencher Gary Gray, who is a former senior executive at Woodside Energy, says he does not think the tax needs to be redrawn.

"It's a profits-based tax, and over the course of the last six and eight months we've seen significant volatility in the price indexes particularly for iron ore," he told ABC Radio National.

"Iron ore has dropped as low as $88 and been as high as $140."

The Greens and some Labor MPs are pushing for changes to the tax so that it raises more revenue.